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3 edpw h_totterman

  1. 1. THE DESIGN VENTURE CREATION PROCESS: From Theoretical Conceptualization to Empirical Indication Henrik Tötterman Swedish School of Economics and Business Administration P.O.Box 479, 00101 HELSINKI, Finland Tel. +358 0 431 33 304, Fax. +358 0 431 33 275 E-mail: henrik.totterman@hanken.fi ABSTRACT This paper is set out to study design entrepreneurship in Finland. The general purpose of this study is to describe and analyze how entrepreneurial processes may emerge among designers, and evaluate, why design ventures are created as they are. Consequently, the purpose and the aim are accomplished through the following steps: First, by presenting earlier theoretical findings related to new venture creation and entrepreneurial processes. Secondly, a case study is carried out to obtain an empirical perspective of the specific phenomena. Thirdly, the selected design venture’s creation process is presented and analyzed in depth. Finally, theoretical and managerial implications are presented. Key Words: Entrepreneurial Process, Initiating Exploitation, New Emerging Ventures, Design Entrepreneurship and Creative Industries.
  2. 2. INTRODUCTION In recent years the entrepreneurial process has increasingly become the focus of entrepreneurship research (e.g. Bhave, 1994; Venkataraman, 1997; Shane and Venkataraman, 2000; McKelvie & Wiklund, 2004; Johannisson, 2005). As pointed out by previous researchers, exploitation is a mandatory step in creating new business ventures. Nevertheless, there has only been a limited conceptual and empirical development of this particular issue in the literature (Choi & Shephard, 2004). Instead, previous researchers have consumed a lot of energy on debating the emergence of venture ideas, either by recognition or discovery made by an entrepreneur. Another debating issue is the level of innovation concerning the venture idea. In this light, it is important to point out that perhaps not all entrepreneurial opportunities are alike, which in turn should diminish the urging need to debate this issue. From an empirical point, it seems relevant to discuss those more common opportunities that require a number of stakeholders (along with the founding entrepreneurs) to create or nurture them into being (Sarasvathy et al., 2003). Furthermore, several different models capturing the initiation of exploitation have been developed, but many of these conflict with empirical results from a limited number of studies (e.g. Choi & Shephard, 2004; McKelvie & Wiklund, 2004). In fact, it is rather fair to state that hitherto research has only limitedly considered the initiation of exploitation processes, especially from an empirical perspective. Design entrepreneurship offers for various reasons important grounds for entrepreneurship research, especially concerning the creation of new business ventures. Hence, entrepreneurship is repeatedly considered in hitherto research as a creative activity, and the entrepreneur as a creative individual with the occasional comparable abilities to an artist (e.g. Johannisson, 2005). Although, artists do not always see themselves as particularly entrepreneurial, their activities often resemble entrepreneurial processes. For instance, before an artist may put artwork for sale there is a preceding progression starting from the breakthrough of initial idea(s), which develop(s) more or less logically into completed artwork. Similarly, the majority of entrepreneurial processes involve a random mixture of exploration and exploitation (March, 1991). It is assumed that design entrepreneurship is a valid choice for extant conceptual frameworks on entrepreneurial processes (e.g. Bhave, 1994; Shane & Venkataraman, 2000;
  3. 3. Sarasvathy, 2001; Shane, 2003). However, some of these frameworks (e.g. Shane & Venkataraman, 2000; Shane, 2003) are increasingly criticised for not being able to explain entrepreneurial activity, for example, in some particular industrial contexts. In fact, some critical literature sources argue that some of these models are so theoretical that their validity is uncertain in the majority of practical cases (e.g. Gartner, 2001; Davidsson, 2004). Consequently, cultural and industry specific circumstances, among other issues, present a need to develop extant frameworks further. Only then are entrepreneurship researchers capable to increase theoretical validity and explanatory capacity, particularly in specific empirical contexts. As a result, studying entrepreneurial processes among design entrepreneurs is assumed to increase the limited academic understanding, especially related to the initiation of venture creation processes within Finnish design industries. There are two major considerations with regard to the research problem. First, a consideration of importance is that the entrepreneurial process view is a frequently and increasingly discussed topic within recent entrepreneurship research. The theoretical knowledge regarding the entrepreneurial process is increasing gradually, but extant empirical understanding continues to remain rather incomplete. Secondly, the initiation of design venture processes requires the motivation and capability of professional designers. Hence, in order to create business ventures, designers have to distinguish and transform both individual and external resources into the emerging venture. Furthermore, various industry specific factors suggest genuine characteristics for entrepreneurial processes within creative industries. However, existing theoretical frameworks are eagerly generalising individual, industrial and institutional factors in order to progress a general theory of entrepreneurship (e.g. Shane & Venkataraman, 2000; Gartner, 2001; Davidsson, 2004). On the basis of the above argumentation, the general purpose of this study is to describe and analyze how entrepreneurial processes emerge among designers, and evaluate, why design ventures are created as they are. The aim of the study is to increase the understanding and knowledge concerning design entrepreneurs’ relation to business initiation and early advancement processes. In addition, the aim is to clarify the distinction of entrepreneurship within design industries. Consequently, the main research questions is: how designers grow to become entrepreneurs that create design related ventures?
  4. 4. Consequently, the purpose and the aim are accomplished through the following steps: First, by presenting earlier theoretical findings related to the entrepreneurial process. Secondly, a case study is carried out to obtain an empirical perspective of the specific phenomena. Thirdly, the selected design venture’s creation process is presented and analyzed in depth. Finally, theoretical and managerial implications are presented. THE PROCESS TOWARDS ENTREPRENEURSHIP The process based entrepreneurship research derives mainly from the societal perspective of entrepreneurship. Consequently, a considerable amount of existing literature sources assume, especially in theory, a causal, rational and linear process view of initiating exploitation. More recently, researchers have developed expanded models that admit the possibility of less rationality in the empirical process, arguing that discovery and exploitation tend to be at least partially overlapping activities (e.g. Herron & Sapienza, 1992; Bhave, 1994; Davidsson, 2003, 2004, McKelvie & Wiklund, 2004). Furthermore, some researchers assume that entrepreneurship is a creative process of human interaction that brings together and organizes thoughts, resources and people (e.g. Sarasvathy et al., 2003; Johannisson; 2005). The creative process view has its origins in the philosophy of pragmatism professed in the early 1900s by James and Dewey (cf. Sarasvathy et al., 2003). It is evident that fundamental differences exist in the way extant literature explains the initiation and progress of exploitation processes. Nonetheless, most descriptions incorporate similar components in order to explain the phenomena. Venture Ideas Recent literature debates regarding the conceptual definition of venture ideas and moreover, whether only the introduction of new-means-end frameworks or also imitation constitutes as venture ideas (Shane & Venkataraman, 2000; Shane, 2003; Davidsson, 2003, 2004). Importantly, the degree of innovativeness influences the likelihood of initiating exploitation, whereas path-breaking venture ideas entail substantial uncertainty, because it is impossible to know the chances of success (Wiklund, 2005). Another ongoing debate in process related research is the emergence of venture ideas. Hence, previous researchers seem to find it challenging to agree if venture ideas are recognized by entrepreneurs (Schumpeter, 1934); they exist in the environment and are discovered by alert individuals (Kirzner, 1997); or they are created along the process by resourceful individuals (Sarasvathy, 2001; Johannisson, 2005). In line with this, Sarasvathy (2001) suggests that
  5. 5. each of these may be correct, depending on the specific venture idea and exploitation process at hand. Individual Aspects Previous research indicates that individual behaviour plays a central role for initiating the exploitation of venture ideas (Casson, 1982). Extant literature describes several underlying reasons for the materialization of venture ideas by certain individuals, but not by others (Shane, 2003). For example, Hills, Lumpkin and Singh (1997) highlight the influence of individual attributes, social forces and the business environment. Other significant aspects are access to information deriving from life experience: employment (e.g. Von Hippel, 1986; Aldrich, 1999) and also the disparity of individuals’ life experience (Evans & Leighton, 1989; Dolton & Makepeace, 1990; Blanchflower & Oswald, 1998; Delmar & Davidsson, 2000). More specifically, research on demographic characteristics (e.g. Borjas & Bronars, 1989; Evans & Leighton, 1989; Casson, 1995; Bates & Servon, 2000) have hitherto comprised studies primarily on how the educational level, age, career experience, opportunity cost and social factors effects entrepreneurs’ decision to exploit venture ideas. Whereas, most of these research areas have been covered in present literature, surprisingly few studies have studied social factors more in detail. Consequently, only a few studies have focused on the social status of entrepreneurs (e.g. Evans, 1989; Dolton & Makepeace, 1990; Stuart et al, 1999) and on the social ties (Hansen & Allen, 1992; Bruderl & Presendorfer, 1998; Aldrich, 1999). Similarly, research, for example, on the social position is still widely missing. On the other hand, research on psychological characteristics (e.g. Knight, 1921; Evans & Leighton, 1989; Busenitz & Barney, 1997; Amit et al, 2001) have primarily focused on personal motivation, core evaluation and cognition as explanatory factors for why entrepreneurs decide to exploit venture ideas. Moreover, extant literature suggests that resource availability will influence individuals’ decision to exploit venture ideas (Aldrich, 1999). Resources refer to all assets, abilities, processes, attributes, knowledge etc. controlled by the individual. More specifically, resources can be characterized as “all tangible and intangible assets that are committed to or available for the discovery and exploitation of a new venture idea” (Davidsson, 2004:115). For example, Johannisson (2000a) divides these assets into human, social and financial capital. There exists naturally other ways to segregate and define assets (e.g. Penrose, 1959; McGee & Dowling, 1994; Liebeskind, 1996; Miller & Shamsie, 1996;
  6. 6. Powell et al., 1996; Nahapiet & Ghosal, 1998; Davidsson & Honig, 2003). However, here the division put forth by for example, Coleman (1990) and Johannisson (2000a; 2000b) are accepted and utilized. Hence, resources contain: financial capital (e.g. Greene, Brush & Hart, 1999), human capital (e.g. Chandler & Hanks, 1994; Busenitz, 1996; Chen et al. 1998) and social capital (Burt, 1997; Reynolds, Storey, Westhead, 1994; Putnam, 1995; Nahapiet & Goshal, 1998; Temple & Johnson, 1998; Yli-Renko, 1999; Baron & Markman, 2000; Cohen & Prusak, 2001; Puhakka, 2002; Davidsson & Honig, 2003). The underlying assumption is that there exist relations and partial substitutability between these different forms of capital (Coleman, 1990). For example, human capital and social capital can be used to compensate the need for and/or increase the access to financial capital (Johannisson, 2000b). However, essential parts of human and social capital can not be acquired with financial capital, e.g. trust or experience (Coleman, 1990). Mode of Exploitation In extant literature, the initiation of exploiting viable new business ventures is often characterized by various challenges, coincidences and several junctures (e.g. Katz & Gartner, 1988). Previous researchers show interest in the mode of exploitation, hence, the form in which the exploitation of venture ideas takes place (Schumpeter, 1942; Acs & Audretsch, 1989; Shane, 2002). Commonly the theme is company creation and the company is the unit of analysis (Gartner, 2001). In addition, several studies have emphasized the vehicle by which exploitation will occur: start a new company, license, franchise, organising existing companys around new venture ideas etc. (Shane, 2003). Regarding the organizational design, some researchers argue that entrepreneurship is always bound to new company creation (e.g. Gartner, 1985, 2001; Low and MacMillan, 1988), whereas other are much more relaxed on this point (e.g. Casson, 1982; Amit, Glosten and Mueller, 1993; Shane & Venkataraman, 2000; Davidsson, 2003, 2004; Johannisson, 2005). Furthermore, previous strategic research suggests that resources are the foundation for organizational strategy and that unique bundles of resources generate the competitive advantage of the venture (e.g. Wernerfelt, 1984; Barney, 1991; Collis & Montgomery, 1995; Venkataraman, 1997). Apart from their effort, the debate generally ignores the origins of resource strengths, and the influence of these on value-creating activities within the emerging venture (Brush et al., 2001). This evident lack in extant research is
  7. 7. particularly crucial for entrepreneurship research that focuses on the interplay between the processes of discovery and exploitation (Bruno & Tyebjee, 1982; Vesper, 1990; Shane & Venkataraman, 2000). Hence, it is sensible to argue that entrepreneur(s) bring individual and external resources together to establish new ventures. Instead, for example, Gartner (1985, 2001) is not very specific of how resources end up in the new business venture. After the initial execution of the venture, the entrepreneur attempts to transform resources, mainly through organizational learning, into more unique and valuable organizational resources (Brush et al. 2001). However, initially each entrepreneur has a unique resource endowment and therefore, resource assembling is bound to take different trails. In that sense, an entrepreneur is faced with a multitude of decisions when assembling resources. The entrepreneurial decisions range from choices related to the acquisition of essential resources, to the combination and further refinement of these. These choices are bound to occur simultaneously and in short order rather than sequentially (Brush et al., 2001). RESEARCH METHODS The study applied an exploratory approach and aimed on unfolding the creation and development process of one carefully selected case. The utilized approach implied that secondary sources, expert interviews and previous experiences of the researcher were used (Arbnor and Bjerke, 1994). The existing structure of the design industry in Finland had a number of implications for how research related to the entrepreneurial process could be performed. Consequently, the distinguishing feature of the study design was qualitative. The choice of research design was justified on the basis of the limited and fragmented notion of design entrepreneurship. Therefore, it was believed that a quantitative study would not enable differentiation between the various types of design entrepreneurs, and thus, the outcome might not give trustworthy results (Saunders, Lewis and Thornhill, 2003). Similarly, Gartner and Birley (2002) suggest that many substantive issues in entrepreneurship are rarely addressed, and that many of the important questions in entrepreneurship can only be asked through qualitative methods and approaches. Data Collection and Case Characteristics The study relied on a case study method and data were collected from multiple sources of evidence, including written sources, participant observation, and an in-depth interview. The written sources included information captured from various company documents (e.g. related to the products, the patent and trademark etc.), official registries (e.g. The Finnish
  8. 8. Business Information System) and information from the case company internet-pages. The researcher also participated in a working seminar (Design Business Network) for design entrepreneurs in December 2005, and observed among other participants, the case entrepreneur. Data were also collected by interviewing the case design entrepreneur. The interview was based on themes considered as relevant by the researcher. More specifically, the researcher was prepared with a couple of general questions, which requested the designer to tell about her profession and her relation to entrepreneurship. These questions were followed up with specifying questions. At the end, a set of check up questions were asked, which focused especially on the entrepreneurial process, and moreover, the essence of resources and motivation. The interview was conducted in January 2005 and lasted for approximately three hours, including a short break. In selecting the most appropriate case, the researcher relied on previous empirical experience from researching design entrepreneurs (cf. Tötterman & Sten, 2005). In addition, the researcher collected data from eight additional entrepreneurial processes, as part of the doctoral dissertation. Consequently, the specific case selection was believed to be representative and demonstrate that an entrepreneurial process is a complex phenomenon. The case selection was based on several criteria: First, to find an entrepreneurial process within the design industries that demonstrates the extensiveness of the process, from becoming self employed to the initiation of exploiting the venture idea. The selected case was believed to demonstrate in an exemplifying fashion, the slow sliding from self employment into design entrepreneurship. Secondly, to find an entrepreneurial process that is driven by a designer that strives to create a business venture. This criterion was particularly central, whereas designers in general are faced with the challenge of turning their individual resources (e.g. experience and competence) into organizational ones. Thirdly, to find a process that shows development over a longer time period. This aloud to study in retro perspective, how the business activities and need for resources changed over time. Following these boundaries the study was limited to cover one entrepreneurial process. The case entrepreneur, found her first company in 1986. The business idea was to provide furrier services (repair and maintenance of fur coats) to private consumers in the local town. In 2000, the entrepreneur found her second company. The company was found to put less emphasis on the furrier services and more emphasis on
  9. 9. her own venture idea. The washable, fur-trimmed shawl has gradually become the main product of the company. It is nowadays sold all over the world by international agents. So far, the company employs directly one person, whereas most production and administrative tasks are outsourced. Moreover, additional staff is hired during busy periods. At last, according to the newest available data, the turnover of the second company was in 2004 254.000€ (292.000€ in 2003) and the result -2000€ (17.000€ in 2003), (Suomen Asiakastieto, 2006). Quality assessment In order, to ensure the credibility of research findings, extra attention was paid on the reliability and validity of the applied research design (Yin, 1989; Saunders, Lewis and Thornhill, 2003). Regarding construct validity, every effort was made to reach investigator objectivity. In addition, the study was set out to study the progress of the entrepreneurial process, by focusing on: changes regarding the venture idea; and the transformation of individual resources into organizational ones. The challenge was to demonstrate that the selected measures did indeed reflect the specific types of change that were selected (Yin, 1989). In addition, multiple sources of evidence were used to establish a chain of evidence. Furthermore, regarding reliability, every attempt was taken to enable that a later researcher could reach the exact same findings and conclusions if replicating the study. Hence, to minimize errors and biases, as many steps as possible were made as operational as possible. Furthermore, recorded data were typed word by word, to make sure that all relevant information was available for analysis. Special attention was paid on the way data were collected and on the fact that collected data were as unbiased as possible, taking into account the limited sample. Furthermore, the data were interpreted and compared against the theoretical framework. Although a study of only one interviewee was too narrow to support wide going generalizations, the selected entrepreneurial process was still considered as a representative choice for the research. Therefore, it is believed that the analysis and conclusions can stand up to the closest inspection (Saunders, Lewis and Thornhill, 2003). FROM WAGE WORK TO ESTABLISHING A LIMITED PARTNERSHIP In the mid 1980s, the entrepreneur to become (hereinafter the pseudonym “Mrs. Furrier” will be used) was faced with a tough and provoking truth. The previously flourishing textile industry in the surrounding metropolitan area of Helsinki was about to dry out. Mrs. Furrier
  10. 10. had worked for almost twenty years with textile and fur fabrics. In order to continue her profession, self-employment was left to be the only alternative. Her previous degree in pattern design had supported her carrier development so far, but she had no knowledge or experience of starting a business. Therefore, in 1986 she attended a special business course for fur trade entrepreneurs, and found the first company later that year. The initial idea to become a furrier started to develop, after listening on the same needs from several different people in the local community. The company exploited her furrier craftsmanship and was operated during the first years from their family home. In that way she could work and look after her three small children at the same time. Consequently, the step to become self-employed was made easier due to the increased time she was able to spend with her children. In addition, the decision involved some immediate cost reductions from previous work related travel expenses and childcare costs. Life became more human and becoming an entrepreneur was not straight, but more a conscious and sliding process. From consumers focus into small time trading with professional purchasers In 1990, Mrs. Furrier’s youngest child started school. Consequently, after working for several years at home, Mrs. Furrier decided to move her furrier business into a separate workspace. Now with some extra private time, Mrs. Furrier became keen to learn more about the field. She decided to study product design at the University of Art and Design in Helsinki. The program lasted for two years and she received professional competence in business conceptualization and product design. Participation in the programme would turn out to be a major turning point for the business on the long run. Mrs. Furrier was asked as part of the course to think of what skills she possessed, and how these could be turned into a product. As we know, she had a degree and several years of work experience from the clothing industry and was skilled in processing fur. It occurred to her that combining these capabilities would result in a rather uncommon skills mixture. Thereafter, the task was to find from a vast raw-material variety the specific materials that should be brought together. However, it was first after discussing with customers that the initial product idea started to emerge. She had come up with the idea of combining died fur and hand printed silk-cotton in an exclusive shawl. However, it would take some years and a lot of development before the final product would reach the markets.
  11. 11. Introducing the own product In 1992, Finland was in the midst of the worst depression, since the 2nd World War. The trade of the company was also strongly influenced and entered a constraining position, with almost no customer demand for its services. At this point, Mrs. Furrier faced a hard decision, whether to close down the company or to find means for survival. As a result, she decided to test the new product innovation on the market. That turned out to be a significant step towards a slow change in the business focus. Consequently, she participated for the first time in the Helsinki International Fashion Fair, to test the product on the home market. Surprisingly enough, it was the foreign customers who actually made the orders. This was the beginning for small time sales of the new product, which peculiarly turned out as export business. This was, however, a rather big issue for Mrs. Furrier personally, whereas she lacked all kind of experience from foreign trade, and even more crucially, still today speaks no other languages than Finnish. Although, the shawl was introduced already in 1992, the initial company continued primarily as a local furrier for many years. The livelihood kept bringing a basic salary, which in turn enabled a small scale development of product related ideas. However, servicing old ladies furs was not always so pleasant; it was more about making a living on something that customers paid for. Making art was very far away from that. That was something to accept, whereas otherwise it would not have worked. However, the shawl remained as a minor side business, although, it was evident that there existed a motivation to develop the business further. Despite motivation, the constraining challenges were both of a financial and human kind. Besides lacking money to commercialize, she experienced various concerns in dealing with international purchasers. As pointed out by Mrs. Furrier: “thinking of these years and these concerns, if I would not have had such a strong belief in my own thing, and if I would have known all the things that I was faced with, then I would not have had the courage to cross the line. In that sense, it was good that I had less knowledge than the other way around.” Slowly, but steadily she increased her capacity and eventually started to consider how to reach her customers more efficiently, both product and business wise. After talking with her domestic retailers, she realized that it was mostly Japanese and Russian tourists who purchased the shawl. Consequently, in 1995 the product was introduced for the first time on an international fashion exhibition in Japan. The exhibition ignited the sales to Japan and started to provide a small, but steady stream of orders.
  12. 12. THE CREATION OF A DESIGN VENTURE Although, the idea to change business focus was distinguished already in the late nineties, it was just a few years ago that it has taken place. As Mrs. Furrier puts it, “it was only very recently that I have been able to clean away this consumer based furrier business and focus completely on my own products”. An important and conscious step towards this change was taken already in year 2000, when a new company was established. The original business idea, to focus on a combination of the specific materials proved to be good. The basic idea of a triangle shaped shawl has stayed in production ever since it was launched. It is today the product that brings the major share of the turnover for the company. Nonetheless, Mrs. Furrier is constantly doing a lot of work in updating and maintaining the product line. Accordingly, to survive on the international markets, the quality must be cutting edge from all perspectives. One must be the peak performer in the small thing that is produced, it must be the best. Then it is possible to receive such a price that the production becomes sensible. So the product quality must be excellent, but quality includes also much more. It is not only the physical material and work quality, but more specifically delivery assurance, time schedules, contracts and keeping the operation together. Mrs. Furrier has learned what is important, little by little along the years, through “the business school of trial and error”. Individual resources in creating the business According to Mrs. Furrier, the movement from being a designer into becoming a design entrepreneur has followed a certain growth process. The process has been an internal development process, and to stimulate it, she has constantly educated herself. All these years she has been involved in various education programs, either related to business or then professional knowledge. In addition, a solid professional background has been a central resource in creating the business, in addition, to an adequate and broad basic field specific education. One concrete proof for her interest in increasing her knowledge is the international patent she filed in 2001, after inventing a chemical process for treating furs. Participation in various education programs has also enabled networking with other people experiencing similar situations. This in turn has naturally given strength for carrying on with the own business. Positively, the current business enables participation for an otherwise busy entrepreneur, whereas the work can be done at any hour of the day. More
  13. 13. generally, Mrs. Furrier is eager to develop, expand and maintain business related relationships. Personal cooperation and trust seems to be important along with the creation of a joint vision. So far, she has experienced the strongest ties with one of her contact persons in the raw-material chain and with another collegial entrepreneur (“sole mate”). Naturally, she also has family, including a self-employed husband, and friends, but the private social network is somewhat limited due to the average 65 hours working weeks. In the beginning when the first company was started, no financial capital existed to invest in the business, which anyway was not so capital intensive. When the own product came into the picture it became important to consider how to finance the business. During the years, there have been occasions of balancing and the business has grown step by step. Along the road, various smaller external loans have been used, but the lack of capital has limited the business expansion. Hitherto, the problem has not been so much the lack of money for promotion, as the lack of resources in the production and back office functions. In general, Mrs. Furrier claims that most financiers are not interested to invest in the company, because it operates in a disappearing industry and is managed by a single entrepreneur. Due to the lack of capital she believes it has been harder to make the business international, and moreover, she has been forced to abandon some additional product ideas. The transformation of individual resources into organizational ones Mrs. Furrier always strives to organize, so that she has “peaceful working time”, and thus, a normal working day is mainly production oriented. In addition to office duties, she spends some time with making raw-material orders and communicating with her subcontractors. The most important ones are the sewer in Estonia; the textile manufacturer in Italy and the fur processor in Finland. At times, Mrs. Furrier is anxious due to the increasing amount of production taking place at subcontractors. To maintain or “herd” the network organization, as she prefers to call it, takes time and can be stressful. When producing in-house, it is easier to estimate what can be produced and how long it will take. Unfortunately, the company has not come up with a solution to cope properly with the involved risks in subcontracting. The company is built in principle around one person and a network of subcontractors. The production is located in many companies around a few persons with special skills. This makes the supply-chain somewhat inflexible compared to larger organizations with several employees. Building up the production network has taken many years of development work. Now when the collaboration has been in place for some years,
  14. 14. it is slowly becoming a more trustful partnership. This allows for more business model related planning, based on the network structure. Furthermore, according to Mrs. Furrier, an entrepreneurial attitude is particularly important in developing and maintaining customer relationships. A long relationship may forgive faults and offers flexibility at least to some extent, but especially delays in delivery may result in lost customers. Most contacts, especially to international customers are operated via e-mail, which is really convenient for the company. Not only does it enable efficient communication despite time zones, but it also enables forwarding e-mails to an assistant company. They in turn make essential language translations and also provide linguistically talented representatives for trade exhibitions. Currently, the company is working hard to make its internationally trademarked brand recognizable all over the world. In addition, business talent is sought after, to assist in licensing the patent to other producers working with furs and other hairs. The process of filing for a patent on an international level has been expensive and the monetary sources have varied between the bank, the entrepreneur and the company. So far, the company has been forced to slow down business growth, instead of being on full frontal selling its products. It is not that the company would not have a desire for growth, but the challenges have been the high raw-material costs and the need for skilled workforce. Now when the business is developing more steadily there is also time to plan the future. In fact, Mrs. Furrier is systematically striving to transform her knowledge, based on her tacit experience, into the company. Everything that is central for the products and operations should be documented, but it is evident that the process is challenging and takes time. In addition, the conscious protection of central business concepts and production techniques is assumed to increase the company’s competitive advantage in the future. The return from entrepreneurship to arts The process from being a designer to become an entrepreneur operating a design venture has requested a lot of time and resources. Although, Mr. Furrier is still enthusiastic of business development, she has also actively started to seek a suitable successor to enable part-time retirement. When the company has a qualified successor to manage the business, she will devote herself to creating arts. Mrs. Furrier would like to continue working within
  15. 15. the business, but mainly with product design and development of production techniques. “Then the products do not need to involve so high commercial profitability thinking. I would like to forget again how much the product should cost in the shop, or at what price it is purchased into the supply chain. That is the largest difference that distinguishes art from a professional designer’s work.” However, until now the potential candidates have mainly lacked the entrepreneurial way of thinking. Additionally, Mrs. Furrier admits that she still needs a certain spiritual growth to let go of her company. DISCUSSION The first period in the entrepreneurial process The examined entrepreneurial process was launched almost twenty years ago. Back then, the decision to become a self–employed craftsman was at least partly forced, due to uncontrollable external circumstances. In that sense, the initial venture idea was based on craftsmanship and not on a particularly innovative business opportunity. Then again, one could argue if the venture idea was innovative after all. For instance, assume that the local town lacked similar services from before. In that case, the venture idea could not be considered as imitation, but instead as a new service or a “new means end” (cf. Shane, 2003). Anyhow, the venture idea emerged from a previous profession and from recognized customer needs. In that sense, the initial venture idea could be expressed as “discovered” by entrepreneurial alertness (Kirzner, 1973). Consequently, the venture idea was materialized due to individual attributes (e.g. previous experience), but also due to external pressure from the social and business environment. Furthermore, the likelihood of initiating exploitation was substantially lower, whereas it was supported by appropriate education, career experience and social factors. In addition, the opportunity cost was considerably low, due the evident risk of unemployment and manageable risks of failure. Hence, the decision to exploit could be described as a process of “sliding” into self-employment, rather than a one time major step into the unknown. Although, the process was unhurried it was at the same time a deliberate movement from wage work into self-employment. Hence, the early process development followed a certain path and was in that sense not a strictly creative process. On the other hand, it is evident that a high personal motivation existed, along with self-confidence for the personal craftsmanship.
  16. 16. At the beginning, the resource availabilities were rather limited and mainly of an individual kind. The lack of financial capital was not crucial, whereas the venture idea relied mainly on existing human capital and on an increase in the social capital (customer relations). However, business related awareness was missing, and thus, requested human capital was assembled from appropriate sources. Most of the central resources remained individual, and hence, the company gave the individual a legal label to perform traditional craftsmanship. In that sense, one could argue that there existed no essential organizational resources, or pressure to create such, despite perhaps a few minor inventories. More precisely, there were no significant attempts to transform individual resources, into more unique and valuable organizational resources. Instead, the individual resources were gradually increasing, whereas the income was mostly used for personal consumption and education of the individual. The second period in the entrepreneurial process An introduction of a new venture idea was commenced, as a result from changes in the personal social environment and expansions in the individual human capital. The idea of combining individual capabilities resulted in the recognition of a new, ground-breaking product innovation. However, it took some time to develop the product into a sellable good. The likelihood of exploitation was uncertain, due to the involved risks, uncertain changes of success, and resource unavailability (both financial, human and social). Consequently, the process progressed in a rather creative fashion, whereas the product ideas were slowly transformed by resourceful persons into a viable business opportunity. Although, the first product prototypes emerged, the venture idea was not decided to be exploited at that stage. Discouraging changes in the business environment diminished the demand for the craftsmanship. The decision to exploit the new product idea, at least in small scale, was thus made easier due to the desperate times. The petite success and initial opening of exports were encouraging, but the venture lacked necessary resources to drive the idea forward. The absent resources were mainly financial, but also human (business experience and language skills) and social (stakeholders and customers). Consequently, the craftsmanship continued along with small time trade and development of the product innovation. On the other hand, a lot of motivation existed to strengthen these resource deficiencies, to enable up scaled exploitation of the product idea. Eventually, the efforts paid of and the product started to sell in a limited number of countries. It is evident that the
  17. 17. individual behaviour played a central role for initiating the exploitation of the venture idea. However, mainly resource constraints forced the initiation to occur only in small scale. On the other hand, certain resource deficits were probably substituted with other resources. For example, despite lingual restrictions the product sales were from the early moments directed to international markets. Furthermore, the desire to change business was slowly becoming obvious. Nevertheless, the mode of exploitation remained consistent for a long time, as did the main source of income. Hence, the company was used as a platform for testing and developing the emerging venture idea. This probably slowed down the progress of the entrepreneurial process, but also enabled “trial and errors” to take place, with smaller risks for business failure. The third period in the entrepreneurial process Finally, the decision was made to consciously change business focus from craftsmanship into fabrication and sales of own products. The transferral process took time, and was formally manifested when a new company was established. Consequently, performing the craftsmanship was brought to a halt, whereas most resources were focused to support the advancement of the emerging business. The basic product idea was almost the same as the one introduced years earlier, but the product line and the support functions expanded and they underwent constant refinements. As a result, one could argue that the venture idea was rediscovered along its expanding exploitation process (cf. McKelvie and Wiklund, 2004). Due to the long market introduction, the product lost, in a sense, its path-breaking status. Consequently, a great deal of involved substantial uncertainty vanished. The product was tested for years on the market, and the entrepreneur increased the understanding regarding the rules of business and international markets. Thus, the chances for the specific business venture were not any longer fully unknown (Wiklund, 2005). Furthermore, the movement from being a designer into becoming a design entrepreneur followed a certain process. This individual level transformation required inputs in human capital and a constant drive to combine business thinking with existing artistic thoughts. Hence, again the individual behaviour played a central role for initiating the exploitation of the emerging venture idea (Casson, 1982). As a milestone, exclusive rights for inventing a production technique were achieved. The technique also improved the product quality considerably, and importantly, the exclusive rights became licensable merchandise for the future. Besides human capital, the individual social capital was expanded via networking
  18. 18. with likeminded people. The networking supported both personally and business wise the development of the entrepreneurial process. Trust and cooperation were central in developing these relations further. As with many other entrepreneurs, the private and business network were at least to some extent intertwined with each other. Financial capital suddenly became more central than before, whereas the new business focus was considerably more capital intensive than the preceding one. The unavailability of especially financial resources clearly influenced negatively the decision to fully exploit the venture idea (cf. Aldrich, 1999). Own savings and the business income were not quite enough to finance the investments made in the exclusive rights, the international trademark and additional investments made in the business. As a result, business growth was holding back, mainly due to lack of resources to deal with capacity problems in the production and the growing administrative workload. Eventually, more and more of production related tasks were outsourced, whereas hiring personnel to the company was perhaps experienced as too risky. Overall, the efforts to construct a functioning production network seemed to function fairly well, but some challenges remained regarding the control and the confidence. Constructing the network structure took time, but was an important step in creating competitive advantages for the one person business. Hence, instead of building personnel wise on the own organization, tasks were preformed by subcontractors. At last, the creation of a new company was intended to support product identity and sales, with a network structure that provides flexibility for manufacturing and administration. Currently, to create and maintain the production network, individual resources are transformed into the business. Particularly, tacit knowledge, as parts of both human and social capital, is seen as vital to get documented and transformed into the business. The risks of relying only on one key person are recognized, but similarly it seems challenging, time consuming and also partly impossible to transform the whole lot of resources. One way to convert tacit resources into more explicit ones has been the filing for exclusive rights. Similarly, value has been created around the brand, by filing for the international trademark and making the brand known internationally. At last, after making the business viable, the entrepreneur is clearly experiencing a desire to return to the roots. Hence, a succession would enable more time for making art and for being an artist. This progression requires that viable individual resources are transformed to the business and that a suitable
  19. 19. person is found to carry on the trade. The future will show, how the business will develop after the succession is carried out. Hence, each entrepreneur has a unique resource endowment, and therefore, the successor will assemble resources and develop business in accordance to an authentic trail of action. Hence, each entrepreneur make own choices related to the acquisition of essential resources, to the combination and further refinement of these. Implications for Theory The research presents some interesting observations concerning the progress of the entrepreneurial process. Previous entrepreneurship research has generally focused on the creation of a new venture or the emergence of a new venture idea. In this study, the focus was not only on these, but also on the development of the resource needs and the individual behaviour, along a stretched and shifting entrepreneurial process. Focusing on the individual made it possible for the researcher to better grasp the process, especially before the venture ideas were introduced, and moreover, before and after the decisions were made to exploit the venture ideas. Previous research, focusing explicitly on a specific process of creating a new company or launch of a venture idea, would almost automatically focus on a shorter time span. Furthermore, the strength of this study is that it takes into consideration that initial resources are assembled by the individual(s) and not by the new business venture. Consequently, entrepreneurial processes often start with a set of individual resources and additional external resources assembled by the individual. This is something that is not particularly thoroughly explained in previous research. All the same, in new ventures, organizational resources are normally brought together from individual and external resources. Furthermore, the study allowed focusing on how resource needs grow and change, along with a constant need for an individual conversion from craftsmanship into more entrepreneurial behaviour. Interestingly, the process involves phases that to some extent linear, but also phases that are strictly creative. In addition, the study supports the idea that discovery and exploitation tend to be at least partially overlapping activities. In this study, some of the venture ideas are either recognized or discovered initially, but some parts (e.g. the innovation towards a patent) follow a highly creative process. Naturally, the initial idea must be seen as less innovative, whereas the latter venture idea is path-breaking also on the international level. No imitation as such occurs. Therefore, in accordance with previous research, innovativeness made the decision to exploit harder (e.g.
  20. 20. Wiklund, 2005). On the other hand, a decision was made to first test the venture idea on a smaller scale. After positive customer response at several occasions, over a longer time span, the decision was taken to take the business further. Some of the previous researchers agree that discovery and exploitation occurs simultaneously, but the stepwise decision making towards full scale exploitation is not often explicitly explained (e.g. Choi & Shepherd, 2004; Wiklund, 2005). Regarding individual aspects, it is clear that the individual behaviour and human capital are in a central role. Despite previous criticism towards research on psychological characteristics, this study supports the value of personal motivation, core evaluation and cognition for the progress of the process. In addition, resource availability seems to influence individuals’ decision to exploit venture ideas. However, the resource requirements and shortages changed during the progress of the process. In addition, the research supported, to some extent, the idea that resource deficits can be compensated. However, the lack of money, when the subsequent venture idea was launched, clearly could not be fully compensated by other capital formations. Nevertheless, there existed also deficits in the human and social capital. Finally, regarding the mode of exploitation, it is important to understand that new venture creation was not the only significant unit of analysis. In addition, the entrepreneurial behaviour was considered as central. As can be seen from the case, the formal organization was not crucial for taking the process further. This in turn contradicts with some of the previous research. Consequently, the two created companies were simply not the most interesting aspects in examined process. Hence, the vehicle to exploit the venture idea changed between the two companies, but it never culminated in the creation of either one. Therefore, it would feel absurd to merely focus on new business creation (Gartner, 1985, 2001; Low and MacMillan, 1988) when studying at least this entrepreneurial process. Furthermore, resources are clearly important for the individual and for the organization, especially when the subsequent venture idea came along. However, it clearly takes a long time to create competitive advantages on the organizational level. Especially, craftsmen seem to experience considerable challenges in transforming their personal resources. However, extant entrepreneurship and management research clearly lack explanatory power regarding the transformation of resources. At last, studying only one entrepreneurial process clearly gives only one example of how resources are assembled and how deficits
  21. 21. are handled. In addition, studying a process from one point in time has many weaknesses. At the same time, a longitudinal study for a period of almost twenty years seems impossible. Implications for Management The findings put forth here include some exciting recommendations, both for business managers and entrepreneurs. To start with, it is important to remember that the entrepreneurial process does not start from the moment that a venture idea is recognized, discovered or created. Instead, the process might actually start or at least is affected by the accumulation of both individual level human and social capital. After a venture idea has emerged and the decision is taken to exploit it, these capital forms along with financial capital normally develop. As a result, the original, perhaps somewhat modest venture idea is either modified, or a new venture idea emerges from customer needs or own innovation. Hence, as the case show, without the initial venture idea to perform craftsmanship, the second more lucrative venture idea would probably never have emerged. More precisely, the individual and business growth processes were necessary to allow this innovation to occur. In addition, it seems equally important to state that designers might be better of if they first become self-employed in a profession, in accordance to their education (e.g. craftsmanship etc.). Hence, receiving a steady income and having a position in the trade, would allow them to develop own product ideas besides the main business. In that way, they would perhaps have a safer platform to allow trial and errors. The uncertainties of starting a new business venture that promotes own product ideas are considerable, due to the deficits in adequate resources at the initiation. After scanning the market and assembling resources, the launch of the grand (rediscovered) venture idea is more realistic and can often be completed in smaller steps. Finally, at least the studied design entrepreneur seems to have an ambition to return to arts. It almost seems like entrepreneurship has not been a desire, but more a driver of the own cause: making a living that supports the creation of arts. Nevertheless, when business starts to flourish, too little time is left for arts and running the business is taking too much time. This awakens a dream to return to arts. This is acceptable, but should be made in a planned fashion, so that the business in itself is not unnecessarily endangered. Then the initiator can very well become only part timer and consume more energy on creating arts. Consequently,
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